The US and Canada struck a last-minute NAFTA deal Sunday night.
Hours before the midnight deadline, the two countries agreed to a framework for a renewed trilateral agreement between the United States, Mexico, and Canada. Newly dubbed the “USMCA” — the US-Mexico-Canada Agreement — it’s basically an updated version of the original North American Free Trade Agreement between the three countries.
US Trade Representative Robert Lighthizer and Canadian Foreign Minister Chrystia Freeland — the two top negotiators on USMCA — said in a joint statement late Sunday night that, together with Mexico, they had reached a “new, modernized trade agreement.”
“USMCA will give our workers, farmers, ranchers, and businesses a high-standard trade agreement that will result in freer markets, fairer trade and robust economic growth in our region,” the statement read. “It will strengthen the middle class, and create good, well-paying jobs and new opportunities for the nearly half billion people who call North America home.”
The breakthrough marked a reversal of a weeks-long impasse and a flurry of tough rhetoric, especially on the part of President Donald Trump and his administration. Both Trump and Lighthizer made it known last week that the US was prepared to move ahead with a bilateral deal between the US and Mexico, leaving Canada out.
But on Friday, the US and Mexico agreed to hold off publishing the bilateral text, in the hopes of using the weekend to hammer out an agreement between the US and Canada to update the decades-old NAFTA.
And now a deal has been reached, and both sides notched victories. Canadian Prime Minister Justin Trudeau called it a “good day for Canada.”
Trump, tweeting Monday morning, congratulated Canada and Mexico and called it a “great deal for all three countries.”
Late last night, our deadline, we reached a wonderful new Trade Deal with Canada, to be added into the deal already reached with Mexico. The new name will be The United States Mexico Canada Agreement, or USMCA. It is a great deal for all three countries, solves the many......— Donald J. Trump (@realDonaldTrump) October 1, 2018
....deficiencies and mistakes in NAFTA, greatly opens markets to our Farmers and Manufacturers, reduces Trade Barriers to the U.S. and will bring all three Great Nations together in competition with the rest of the world. The USMCA is a historic transaction!— Donald J. Trump (@realDonaldTrump) October 1, 2018
Senior Trump administration officials are calling this a big win for the US, Canada, and Mexico and say the deal “represents fulfillment of one of the president’s most important campaign promises.”
A peek at what the US and Canada agreed to during negotiations
A few notable issues stalled the negotiations between Canada and the US over the past month — and at the outset, these appear to have been mostly resolved, giving each side a chance to declare victory.
The US wanted greater access to Canada’s dairy market, and according to senior Trump administration officials, they won “a good deal for American farmers” on that front. The deal also calls for the elimination of Class 7 milk pricing, a new class of dairy Canada created that US dairy farmers said decreased their ability to export to Canada.
Canada wanted to preserve NAFTA’s Chapter 19, an independent panel set up to resolve special trade disputes. Though it’s renumbered in the final USMCA agreement, the provision stays mostly intact.
Ottawa also wanted some protections from Section 232 tariffs — the mechanism the Trump administration used to impose steel and aluminum tariffs on countries, including Canada, which requires a national security justification. Senior Trump administration officials said accommodations would be made to protect Canada from tariffs on automobiles. Canada did not get guarantees over those over steel and aluminum tariffs, and they’ll be dealt with separately.
These, of course, are not the only components of the deal, and this new agreement incorporates the components of the bilateral agreement between the US and Mexico, including rules of origin for automobiles (meaning a certain percentage of parts have to be manufactured in each country to avoid tariffs) as well as new digital trade rules, intellectual property protections, and strengthened labor rules.
There are still a few hurdles before
NAFTA 2.0 USMCA becomes a reality. The revised pact needs to be approved by all three governments, including the US Congress, which won’t consider the agreement until 2019.